Online critics take aim at $700 billion financial bailout proposal
| Bailout type | Cost to taxpayers (Source: Reuters) |
|---|---|
| Proposed Treasury Department legislation | $700 billion+ |
| Bear Stearns financing | $29 billion |
| Fannie Mae and Freddie Mac nationalization | $200 billion |
| AIG loan and nationalization | $85 billion |
| Federal Housing Administration housing rescue bill | $300 billion |
| Mortgage community grants | $4 billion |
| JPMorgan Chase repayments | $87 billion |
| Loans to banks via Fed's Term Auction Facility | $200 billion+ |
| Loans from Depression-era Exchange Stabilization Fund | $50 billion |
| Purchases of mortgage securities by Fannie Mae and Freddie Mac | $144 billion |
| TOTAL | $1.8 trillion+ |
| COST PER HOUSEHOLD | $17,064+ |
Internet criticism of the Bush administration's proposed $700 billion financial bailout package is growing, with skepticism crossing normal ideological boundaries.
On Tuesday, the conservative RedState.com pointed out that the Republican Party 2008 platform, adopted just weeks earlier, says "we do not support government bailouts of private institutions." An article on the liberal site DailyKos.com said there was "deep skepticism" toward the Mother of All Bailouts. Paleo-conservative doyen Pat Buchanan called the plan's backers "foolish and incompetent financiers and politicians," while a Huffington Post contributor said that the Bush administration "put a gun to the head of Congress."
Rep. Ron Paul, R-Texas, who presciently warned five years ago that taxpayers would be "forced to bail out investors, wrote an article for CNN.com saying that the bailout will create "even greater instability in the financial system in the long term." The libertarians at LewRockwell.com showered their readers with a deluge of posts, including ones titled "The Mugging of America" and "The Rescue Scam."
Mostly absent have been enthusiastic endorsements of Treasury Secretary Henry Paulson's three-page bailout bill that was submitted to Congress. The conservative Heritage Foundation said that "incompetent executives" needed to lose their multimillion-dollar severance packages, a requirement not in the Paulson plan, and a senior fellow at the Cato Institute offered a cautious defense with this tepid conclusion: "Something good may yet come out of all this."
For his part, Paulson has painted a nearly apocalyptic scenario of what could happen were the taxpayer-funded bailout not approved. His testimony before the Senate Banking Committee on Tuesday said that bad loans have already created deep financial uncertainty, and "if that situation were to persist, it would threaten all parts of our economy."
The online skepticism--or, in some cases, outright condemnation--seems to be mirrored on Capitol Hill.
"I don't think a single call to my office on this proposal has been positive," Sen. Sherrod Brown, an Ohio Democrat, said at the Senate hearing on Tuesday. Sen. Richard Shelby, an Alabama Republican, suggested that Congress consider "some alternatives." Politico.com reported that Vice President Dick Cheney's attempts to persuade House Republicans to support the measure failed miserably--an intra-party revolt unusual during the Bush presidency.
It also may be a matter of no longer trusting the Bush administration's figures. In 2003, the administration offered reassuring estimates that the cost of Iraq reconstruction would be as low as $1.7 billion; the supposedly nonpartisan Congressional Budget Office put it at $50 billion to $100 billion. Now, as we know, the true price tag to taxpayers has been closer to $3 trillion, with an extra $12.5 billion being spent every month.
Rep. Jose Serrano, D-N.Y., posted a list of questions on his Web site saying: "When President Bush tells us we must pass the bill exactly as he proposed it right away or face a catastrophic event, why do I feel like I'm voting on whether to go into Iraq all over again, and worry that the results will be similarly bad?"
Other comparisons drew parallels to other bills that the Bush administration pressured Congress to enact with minimal debate. New York Times columnist Andrew Ross Sorkin offered this line: "It is the financial equivalent of the Patriot Act."
As McCullagh's Law would predict, the situation involving the Patriot Act in 2001 also involved heavy pressure brought on politicians to approve a bill in a time of apparent crisis, with minimal time to prepare. Rep. Barney Frank, D-Mass., said during the debate seven years ago: "What we have today is an outrageous procedure: A bill, drafted by a handful of people in secret, comes to us without a committee review and immune to amendment." (More recently, Frank is the politician most responsible for blocking efforts to reform Fannie Mae and Freddie Mac, leading to the recent $200 billion bailout.)
This week's political response to the latter part of the boom-and-bust cycle is mostly predictable, at least in broad outline. When a central bank such as the Federal Reserve expands the money supply too quickly, it can create a temporary boom fueled by unsustainable borrowing and so-called "malinvestments" that would not have taken place otherwise. Today, real estate has become the very definition of a malinvestment.
The subsequent bust and recession, according to this view, is necessary to return the economy to something approaching normal.
F.A. Hayek, the late Nobel laureate, wrote something over half a century ago that remains eerily relevant: "Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about..."
Translated: The housing boom (and subsequent bust) were caused by overmuch government credit expansion and meddling in the U.S. financial system. Continuing along that path will only make a bad situation worse.
Declan McCullagh, CNET News' chief political correspondent, chronicles the intersection of politics and technology. He has covered politics, technology, and Washington, D.C., for more than a decade, which has turned him into an iconoclast and a skeptic of anyone who says, "We oughta have a new federal law against this." E-mail Declan. 
Remember: You REAP what you SOW...!!!
8 Years of DEMOCRATS - PEACE & PROSPERITY
8 Years of REPUBLICANS - WAR & MISERY
You SOW McPAIN, we shall REAP PAIN!
The economy did pretty well after the tech bubble burst and the shock of 9/11. But it all starting falling apart after 2006, when something CHANGED, oh yeah, the DEMOCRATS controlled CONGRESS. Then, Raines (Clinton appointee and Obama backer) cooked the books at Fannie and Congress did nothing. Financial disaster!
Welcome to change!
You are very correct and if we let the Democrats into office we will reap what we sow.
By expanding the budget by billions of dollars to fund a health care system that has more flaws than our current one, we will sow higher taxes. The democrats were unable to get us out of this war to begin with even when we voted them into a majority in congress, how are we to trust them to get us out sooner?
And again reaping and sowing with republicans,
Not as an expansive growth in our budget but still a growth,
causing further taxes, more wars, and more death.
So what do we reap when we sow the seed of calling someone a kook who has made financial predictions years before, and only now begin listening to him.
As Americans we should take responsibility for this mess and rise to fix it. Not continue to place blame, the blame is with us for not standing up sooner and taking care of the mess.
To clarify my point, so it does not seem like a blanket statement. After each dramatic period in the United States [The Great Depression is one of those markers], it was realized that public utilities, and certain services could no longer be privatized. These past incidents were the reason for regulation. It's not a stop gap measure, but a means to ensure the financial, and social stability to ensure growth. A bunch of starving poor people, who are the backbone behind production in the US, does not help anything. Even if all the work is off-shored, a bunch of starving poor people will impact the infrastructure.
Anyway, I hope you understand what I am trying to get at. Somethings, not ALL things require regulation. Somethings, not ALL things, can not be privatized. Enron used to be Houston Electric I think. The media is controlled now because Colin Powells' son made it possible by removing the one barrier that prevented it. The gas gauging after Katrina is totally un-forgiveable, and the spineless stance (by show admiration for them making money) by the administration to prevent the oil companies from ever doing that again.
Yea, this crap was sown alright.
This is just the SAVINGS AND LOAN SCANDAL reproducted by the bush family at a greatest and biggest scale.
look at : The Bush family and the S&L Scandal
http://rationalrevolution.net/war/bush_family_and_the_s.htm
AMERICA NEEDS TO SAY ENOUGH IS ENOUGH!!!!!!!
Does any fool truly believe that big business would've pushed the boundaries if they knew they'd be slapped down?! NO!
Opting for more of the same IS the definition of insanity!
http://www.barackobamatest.com/
I think if people let go of their allegiance to the partisan labels (that don't mean much any more) and actually evaluated policies, many Obama supporters would in fact favor of McCain. But instead they just see McCain=Bush=Republican=Bad.
No taxpayer money until we see who got what! Our representatives in Washington are not doing their job. No vision and no oversight until the train hits and then they spring into action doing what they do best, spending other peoples? money. Too late!!!
They should have acted as soon as they found out Raines had cooked the books.
Unfortunately, it appears that some have decided that it is more profitable to represent the lobbyist?s interests and not ours. Then, of course, comes their real full time job and that is to somehow find a way to get reelected. No time for the Taxpayers. Taxpayers need to see a list of all those financial lobbyists, who they represent and how much they paid/contributed to who (House & Senate) in any and all forms, especially Fannie and Freddie. Think Polisi, Reid and Boehner will give it up?
85B / 200M = $415 per person.
Doh, that changes things a little.
And now we are facing an election where one of the candidates has a history of supporting the Bush policies in lockstep, both support the bailout, and we have a bunch of numbnuts running around on TV pointing fingers and doing red team vs. blue team cheers? This is no longer a country, it's become a fracking high school frat party. What is wrong with people?
In fact McCain has disagreed with Bush and the republican party on a number of issues. During his RNC speech, McCain pretty much threw both of them under a bus, as did Obama during his DNC speech. Also, a couple years ago McCain saw this meltdown coming and tried to convince the democratic congress to prevent it, but to no avail. And during this time, Obama has taken more lobby money (from AIG, Freddie, Fannie, etc) than any other senator.
The above are facts from which you are free to draw your own conclusion. I conclude that both parties are to blame.
Another fact ... only one presidential candidate has a history of going against his own party when that party is stupid/greedy. I think that trait will be needed in order to fix this mess.
"Almost up until the time it was taken over by the government in the nation's financial crisis, one of two housing giants paid $15,000 a month to the lobbying firm of John McCain's campaign manager. The money from Freddie Mac to the firm of Rick Davis is on top of more than $30,000 a month that went directly to Davis for five years starting in 2000."
Sorry, but I'm not feelin' warm and toasty.
$700,000,000,000 bailout value to cover default f&f mortgages
$300,000 $400,000 $500,000 average value of each mortgage [pick one]
2,300,000 1,800,000 1,400,000 # of mortgages covered by bailout
9,200 7,200 5,600 morgages/day
1,000 # of lenders [only the shadow knows]
9.2 7.2 5.6 # mortgages/d/lender
$4,900,000,000,000 value of fannie&freddie mortgages
16,300,000 12,300,000 9,800,000 # of f&f mortgages
14% 15% 14% default rate represented by bailout amount
14% bailout amount as % of f&f mortgage holdings
5% current f&f new mortgage default rate
$460,000,000,000 $ of bailout in excess of coverage for current default rate
66% % of bailout in excess of coverage for current default rate
f&f = fannie mae & freddie mac [duh]
Note that commercial mortgages are also included!http://www.charlotteobserver.com/104/story/205054.htmlText of Draft Proposal for Bailout Plan Published: September 20, 2008 LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETSSec. 12. Definitions.For purposes of this section, the following definitions shall apply: (1) Mortgage-Related Assets.--The term ?mortgage-related assets? means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
- by upthere415 September 25, 2008 7:59 PM PDT
- Does this sound like another era of:
- Like this Reply to this comment
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Showing 1 of 2 pages (30 Comments)0% down loans for the mega rich?
Remember what happen to the real estate market when banks were allowing 0% down loans to people who could't otherwise afford it.
Now, we're doing the exact same thing, and repackaging it as a 0% down loan to defunk companies who can't afford to operate.
So what happens when these companies simply use up all their loan money, and figure out that it isn't worthwhile to continue operating, and just exit.
Or maybe they figure that since they don't have much at stake, they make even more riskier bets to get even higher returns. And when those risker bets cause them to lose even more money, they deplete their loan money, and exit.
Basically its:
Past Situation: Banks loan to people who can't afford at Zero percent down.
Past Result: Default rates on loans skyrocket when houses are worth less than bought, causing banks to become insolvant.
Current Situation: Government loans insolvant banks and brokerages 0% down loans at no risk to them.
Future result: ... (see what happens when these companies can't repay as expected)
What will happen when that time comes? Will we end up with an insolvant government who needs to get bailed out by tax payers?
Jonathan L